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A seller who partners with a business broker is a smart seller. A seller who partners with the right business broker is a successful seller. Asking the appropriate questions is key to making the suitable choice when hiring a business broker.
1. What is your closing ratio? Comparing competing brokers' closing ratios is a simple way to settle any internal debate about the correct choice of broker. Of all the offers the broker writes, how many does he or she close? The higher the percentage, the more desirable the broker.
2. Do you have a database of buyers? There are two main ways brokerage firms may maintain buyer data: paper trails of contact information from earlier queries, or a buyer database in a contact management software program. A database is the preferred method for storing buyer records because it provides quicker and more specific searches.
3. Do you work with tax specialists, lenders, and attorneys? When a seller and a buyer both come into a deal with their own experts, chaos is likely. A business broker who has established mutually beneficial relationships with specialists such as CPAs, attorneys, and lenders will create a team capable of working toward what is in the best interest of both the seller and the buyer. CPAs will participate in the business evaluation, lenders can assist the buyer in the buying process, and attorneys (and only attorneys) will be responsible for preparing the closing documents.
4. Do you have testimonials? Just as an employer may ask a prospective employee for references, a seller has the right to ask a broker for references or testimonials from sellers who have worked with him or her in the past. Because all business sales are confidential, a professional and experienced broker will have a list of sellers who have given their permission to be contacted for this purpose.
5. What is your commission? While commission is an important piece of information, it should not be the deciding factor when partnering with a business broker. Using all of the questions that have been suggested throughout this series, the seller should first determine if the broker is the best fit for the business. A business sale is not a time to skimp on expenses, and a business broker is a fine example of the adage, "You get what you pay for." A seller can expect to pay anywhere from 10% to 15% in commission for a broker who will spend on advertising, co-broker when possible, and deftly facilitate the entire sales process.
If you would like assistance with selling your business or determining whether partnering with a business broker is appropriate for you, please contact George & Company, located in Worcester, MA. We have honed our business skills over decades of appraising, selling, and financing small to middle-market companies. It would be our pleasure to assist you in making decisions that will best benefit you and your company.